Newsletter April 2005
Talk of the $105 barrel. Insufficient refinery capacity. Big fire at Houston. EU cutting up rough with the US over unfair trade. Dow in retreat. It’s enough to make a man eat his own kids!
Now we are
in a new financial year and post-budget, the FTSE has been pegged back to the
position it had on Feb 1st and super-optimism has been watered down
somewhat.
Sectors
have changed places and for instance Steel
has gone from one of the strongest sectors (Jan to Mar) to one of the
weakest. Retailers are reeling from the spending slowdown and it is reported
that borrowing by homeowners has reversed indicating that credit is being
reined in What goes around comes around
as they say.
In
February I reported Morgan Stanley’s
tips for takeover. British Vita one
of the prospects has risen 31% since Jan.
I remarked
last month about Building and
Construction with Persimmon in
mind. Recently builders prices have been relatively strong while slightly off
their highs and just now weaker still. Gordon Brown seems to think he is doing
many a favour with his land giveaway. How it will affect builders is anybody’s
guess.
Tony
Jackson writing in the Sunday Telegraph
puts forward some strange arguments for a fall in share prices, but I can’t
agree. He does admit that there is an acute supply shortage. Re Persimmon and others he points to the
strong rise since the start of 2000. He does hint that builders restrict
construction to suit demand while helping their profits. Showing figures that
illustrate a 2% rise in houses built by Percy
between last year and this equating to a 30% rise in operating profits. Of
course, since the dotcom boom ended so spectacularly, bricks and mortar
specialists have looked a far better bet, but they are still on lowly ratings
and with interest rates no longer fluctuating like a rollercoaster perhaps we
are in a new era. Nonetheless values might be stretched at the moment and
investors should be wary of buying the peaks.
Where I do
agree with erring on the side of caution is the fact that the housebuying
public seem to be stretching themselves to the limit and in some cases I
daresay beyond it. That is certainly not healthy and will not make a stable
marketplace. Hence the current decline in monthly house price figures even
though over the last 12 months the rise remains at 7.9 %. Still bonny for most
homeowners.
Our
portfolio based as it is on smaller stocks has seen a little weakness recently.
Trends do not seem to be firm so watch those S/L’s. Airpartner is due to release results next week. I await them with
interest. Currently it is our most appreciated share (since selling Synergy).
At our
last meeting, members present had a rush of blood to the head and acted
somewhat impetuously judged by previous experience. Spring must have been in
the air. Actions proposed, ranged from purchasing Merrill Lynch World Mining Investment Trust to selling e-gold. Financially it was almost a
straight swap of an investment we have never really been happy about in
exchange for an easily tradeable trust which is widely based over all
commodities and all regions of the world. Other activity, included an addition
to our MITIE holding and a modest
purchase of Arla. We await positive
movement on several fronts therefore. Our ‘way out portfolio’ took a plunge with
Monterrico metals. The stockmarket wavered and metals weakened. We await a
turn-up in fortune as the market strengthens
We all
congratulate Mourad on his marvellous efforts in securing the Proshare Website
of the Year Award. The evening itself was extremely enjoyable with a
spectacular burst of pleasure when the award was announced. The photograph of
members surrounding Emily and clutching ‘trophies’ tells it all!!
The most
recent market fright is associated with cash shells. Advice is to steer clear of
such vehicles. Aim list is full of them but the risks are obvious.
On the
week Sterling was the strongest major currency. Remarkable. Happy investing.
ML April 4th 2005